San Francisco Frontiers - US stocks fall as inflation unexpectedly heats up

Following days of attention on US President Donald Trump's tariff moves, traders were focusing on the January consumer inflation data, which is set to play a role in the Fed's next interest rate decision.

"Investors were looking for reassurance in this morning's inflation report -- and they didn't get it," said Bret Kenwell, US investment analyst at eToro trading platform.

He said the "higher-than-expected print further lowers the odds of rate cuts from the Fed this year and stokes investors' reflationary fears".

The consumer price index (CPI) edged up to 3.0 percent in January from a year ago, after hitting 2.9 percent in December, official data showed. Analysts had expected inflation to ease to 2.8 percent.

Wall Street's three main indexes opened sharply in the red following the data's release.

US President Donald Trump, who made tackling inflation and the cost of living a priority during his election campaign, blamed his predecessor Joe Biden for the unexpected uptick.

He also reiterated his call for the Fed to cut rates, saying on his Truth Social playform that it "would go hand in hand with upcoming Tariffs!!!"

- 'Market volatility' -

Fed boss Jerome Powell on Tuesday repeated that the US central bank was in no hurry to lower borrowing costs further.

The Fed, whose inflation target is at two percent, kept rates unchanged last month after three consecutive cuts.

At the end of 2024, Fed policymakers pared back the number of rate cuts they expect this year to two, some citing concerns about trade uncertainty following Trump's election victory.

Analysts warn that Trump's tariffs -- and plans to slash taxes, regulations and immigration -- risked reigniting prices.

"What makes today's rise in CPI inflation data so precarious is that many believe this is just the beginning, as tariffs could push inflation even higher," said Jochen Stanzl, chief market analyst at financial services firm CMC Markets.

"Market volatility is set for a perfect storm as the mix of higher inflation and the threat of tariffs serve to scare investors," Stanzl said.

"Given today's inflation numbers, it is questionable whether the Fed will be able to deliver on its two rate cuts planned for 2025."

- Heineken fizzes -

In Asian markets, Hong Kong led gains thanks to another tech rally.

In Europe, London and Frankfurt hit fresh record highs, with support coming from cuts to interest rates in Britain and the eurozone, as well as positive company earnings. Paris was in the red in afternoon deals.

Shares in Dutch brewer Heineken fizzed as traders cheered better-than-expected beer sales. The stock surged almost 14 percent, making it the biggest gainer on the Amsterdam market.

- Key figures around 1440 GMT -

New York - Dow: DOWN 1.0 percent at 44,131.66 points

New York - S&P 500: DOWN 0.8 percent at 6,018.74

New York - Nasdaq: DOWN 0.7 points at 19,501.78

London - FTSE 100: FLAT at 8,781.61

Paris - CAC 40: DOWN 0.2 percent at 8,010.57

Frankfurt - DAX: UP 0.1 percent at 22,067.92

Tokyo - Nikkei 225: UP 0.4 percent at 38,963.70 (close)

Hong Kong - Hang Seng Index: UP 2.6 percent at 21,857.92 (close)

Shanghai - Composite: UP 0.9 percent at 3,346.39 (close)

Euro/dollar: DOWN at $1.0346 from $1.0360 on Tuesday

Pound/dollar: DOWN at $1.2400 from $1.2446

Dollar/yen: DOWN at 154.29 yen from 152.45 yen

Euro/pound: UP at 83.45 pence from 83.24 pence

West Texas Intermediate: DOWN 1.4 percent at $72.28 per barrel

Brent North Sea Crude: DOWN 1.2 percent at $76.07 per barrel

Q.Nelson--SFF